Stocks a and B Have the Following Data $\text {\underline{ A} }$

question 25

Multiple Choice

Stocks A and B have the following data.Assuming the stock market is efficient and the stocks are in equilibrium,which of the following statements is CORRECT?                                               $\text {\underline{ A} }$       $\text {\underline{ B} }$

$\begin{array}{lll}\text { Required return } & 10 \% & 12 \% \\\text { Market price } & \$ 25 & \$ 40 \\\text { Expected growth } & 7 \% & 9 \%\end{array}$

• A) These two stocks must have the same dividend yield.
• B) These two stocks should have the same expected return.
• C) These two stocks must have the same expected capital gains yield.
• D) These two stocks must have the same expected year-end dividend.
• E) These two stocks should have the same price.

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Definitions:

Monthly Payments

Regular payments made once a month as part of a financial agreement, such as a loan or mortgage.

Interest

The cost of borrowing money, typically expressed as a percentage of the amount borrowed.

Compounded Annually

Interest calculation method where the interest is calculated once a year and added to the principal sum, affecting the next year's interest calculation.

Quarterly Withdrawals

Periodic withdrawals from an investment or savings account that occur every three months.